Stock Pitch

Max Lipscomb, Jack Schrager

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Table of Contents

I. Investment Thesis

II. Industry and Company Overview

III. Core Businesses

IV. Valuation

I. Investment Thesis

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GenCorp (NYSE: GY)

Recommendation: Buy Current Price: $15.31 Price Target: $24.00

GenCorp’s valuable intellectual property, dominant competitive advantages, long term sole source contracts, propulsion

monopoly, and valuable real estate make it a compelling investment based on prevailing market pricing.

Realization of real estate value and development of property

Transformative acquisition and synergies

Increased efforts towards investor relations

CATALYSTS

RISKS

Sequester and reduction in revenue from NASA contracts

Emerging competition (SpaceX)

Lack of experience in real estate development

II. Industry and Company Overview

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Direction of Warfare

1900’s 2013

Small Arms Armored Vehicles

Aircraft Tactical Missiles Autonomous

Weaponry

FUTURE OF US MILITARY

Since 2000, it has been increasingly clear that the U.S. will be unable to devote ground troops to every combat

situation in which we are called to arms

Instead, proxy wars and tactical strike support have been increasingly common methods for the U.S. to protect its

interests overseas

In general, we believe this points to the continued use of medium to large-size liquid-fueled rockets

Purchases of tactical missiles and missile defense will also likely be relatively immune to spending cuts from the

sequester

While we think it is very hard to predict which companies will successfully develop the best explosive configurations

and targeting systems, there is a distinct investment opportunity in rocket propulsion

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Company Background

GenCorp is an aerospace company with two divisions:

Aerojet-Rocketdyne, a supplier of premium rocket

propulsion technologies

Easton, a recently formed group that manages

GenCorp’s real estate holdings

OVERVIEW FINANCIAL OVERVIEW

($ in millions, except per share data)

Common Stock (Ticker GY) $15.31

Outstanding Equity Instruments

Common Stock 59.5

Dilutive Shares from Options 0.0

Total 59.5

Equity Value $910.9

- Cash and Cash Equivalents (169.2)

+ Total Debt 704.6

+ Minority Interest 0.0

Enterprise Value $1,446.3

Metric Multiple

2012A Revenue $1,695.0 0.9x

2013E Revenue 1,775.0 0.8x

2012A EBITDA $205.6 7.0x

2013E EBITDA 226.0 6.4x

Strategic Propulsion Tactical Propulsion

Missile Defense Systems Spacecraft Propulsion

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Rocketdyne Acquisition

Rocketdyne was previously owned by United

Technologies Corp

GenCorp was the only logical strategic buyer

Creates an effective monopoly on medium and large-

sized liquid-fueled rocket engines

“The FTC said that it approved the deal even though

it would give GenCorp a monopoly in the market for

a certain type of high-performance missile defense

interceptor propulsion system, because the Defense

Department wanted to see the transaction go

forward.” -Reuters

Other Transaction Notes:

Acquisition doubles the size of GenCorp

Highly accretive at 4.5x 2013 EBITDAP

Creates economies of scale and complimentary

product offerings

Also ads a significant debt load to the pro forma

entity

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OVERVIEW

GenCorp United

Technologies

Rocketdyne

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ACQUISITION DYNAMICS

1. United Technologies sells subsidiary Rocketdyne to raise

cash for Goodyear acquisition

2. Department of Defense mandates acquisition despite

creation of propulsion monopoly

3. GenCorp pays United Technologies Corp. $411mm,

which was financed through raising debt

4. An additional $55mm will be paid upon acquisition of

UTC’s 50% ownership in R.D. Amross (joint venture with

a Russian Company)

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Debt Financing: $411mm

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R.D. Amross (50% stake)

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III. Core Businesses

Programs 1980 1990 2000 2010 2020

Guided Multiple Launch Rocket System (MLRS)

Tactical Tomahawk

Patriot Advanced Capability (PAC-3)

Javelin

TOW

Standard Missile Propulsion

Atlas V

THAAD

Exoatmospheric Kill Vehicle (EKV)

Standard Missle-3

Orion

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Stability of Contract Revenue

= New Product

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Customer Breakdown

END USER

23%

21%

21%

20%

15% All Other

ULA

Lockheed Martin

Raytheon

NASA

DIRECT CONTRACTOR

59%

39%

2%

Cost Plus

Fixed Price

Other

CONTRACT TYPE DOMINANT COMPETITIVE POSITION

GenCorp’s moat In missile propulsion is impenetrable

GY operates primarily on sole-source, long-term contracts (90%)

Customer emphasis on risk-avoidance

Aerojet has served its two largest customers, Raytheon and

Lockheed for more than 25 years each

Rocketdyne has supplied NASA and ULA for more than 50

years

Long certification process for new market entrants

Wide Range of contracts and work despite few customers

Literally rocket science

28%

24% 17%

15%

11% 5% U.S. Air Force

NASA

MDA

U.S. Army

Other U.S. Govt

Commercial

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Propulsion Monopoly

Company Parent Propulsion Type Propulsion Application

Aerojet GenCorp Inc. Solid, Liquid, Air-Breathing, Electric Launch, In-Space, Tactical

Alliant Techsystems Alliant Techsystems Solid, Air-Breathing Launch, Tactical, Strategic, Missile

Defense

Astrium European Aeronautics Defense &

Space Co. Solid, Liquid In-Space

Avio Avio S.p.A Solid, Liquid Launch, In-Space

Electron Technologies L-3 Communications Corp. Electric In-Space

Moog Moog Liquid, Electric In-Space, Missile Defense

Northrop Grumman Space Tech

Northrop Grumman Liquid In-Space

Pratt & Whitney Rocketdyne United Technologies Corp. Liquid, Air-Breathing, Electric Launch, In-Space, Missile Defense

Safran Safran Liquid Launch, Tactical

SpaceX SpaceX Liquid Launch, In-Space

Nammo Talley Nammo Talley Solid Tactical

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GAAP & Customer Subsidies

($ in millions, except per share data)

Most pension expenses are non-cash and subsidized

Aerojet’s legacy pension expenses are non-cash

until 2015 due to MAP-21

Post-2015 pension expenses are heavily subsidized

by the gov’t due to CAS 412 and CAS 413

PV of savings: $830m (using 7% discount rate)

R&D Expenses are mostly customer subsidized:

GenCorp pays for between 6 and 10% of R&D costs

High percentage of cost-plus contracts mitigates margin

risk and the chance of projects going over budget

HIGH, STABLE CASH EARNINGS YEAR PENSION EXPENSE

2013 $131.6

2014 129.3

2015 126.5

2016 123.2

2017 119.8

2018-2022 544.8

YEAR GENCORP R&D CUSTOMER R&D

2010 $17.4 $283.7

2011 27.4 276.0

2012 30.3 271.8

YEAR SALES TO U.S. GOV. % OF SALES

2010 $936.9 92%

2011 855.8 93%

2012 786.1 94%

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Javelin Missile

http://www.youtube.com/watch?v=jIlROqW0fnc

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Management Guidance

(1): http://www.sec.gov/Archives/edgar/data/40888/000092189513001268/ex991to8k07319_06162013.htm

WARREN BOLEY (CEO)

Developed solar electric propulsion technologies that were already being used to power "some very big" U.S.

government satellites that he was not allowed to identify

Seeing a huge number of orders from satellite manufacturers

Dramatically lowers the cost of launching satellites into orbit by reducing fuel

Fuel is often the biggest weight item on a satellite

Developed a silent propulsion system

Useful on unmanned planes

Developed a hypersonic motor

All three major competitors - Boeing Co (BA.N), Raytheon Co (RTN.N) and Lockheed Martin Corp (LMT.N) – used

the motor in rival bids to design a next-generation missile

Allows missiles to travel at Mach 4, or four times the speed of sound,

The new technology could generate up to $10 billion in new weapons sales in coming years

“It's a game changer. It's revolutionary. It's not just 10 percent more,” Boley said, adding that he expected the solar propulsion system to generate billions of dollars in orders. Warren Boley, CEO of GenCorp (1)

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Real Estate

($ in millions, except per share data)

PROPERTY DEVELOPMENT

GenCorp owns approximately 12,200 acres of land in the Sacramento metropolitan area

6,000 acres are undergoing entitlement and have been zoned for development

Development Agreement completed in 2011 for 1,400 acres; project fully entitled

Easton expected real estate development:

6,044 acres

18,508 housing units

12.7 million square feet of commercial and retail

ESTIMATE OF VALUE LAND LOCATION

Based on going rates for commercial and residential

real estate in the Sacramento market:

Estimated Land Value: $400mm-$1b

Current Enterprise Value: $1.45b

Bear Base Bull

Pretax $367 $611 $857

Tax $116 $202 $288

After Tax $251 $410 $569

Sacramento, CA

IV. Valuation

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Valuation – Discounted Cash Flow

($ in millions, except per share data)

Share Price Calculation

PV of FCF $2,062.8

+ Cash 170.0

-Debt (504.0)

+ Real Estate 410.0

- Pension Lia (80.0)

- Environ Lia (60.0)

Equity Value $1,998.8

Diluted Shares Out. 83.3

Share Price $24.00

Assumptions

Prepetual FCF Growth Rate 1.0%

2014-18 Revenue Growth Rate 3.0%

WACC 11.0%

FCF Calculation

2014 2015 2016 2017 2018 Terminal Value

Revenue $1,850.0 $1,905.5 $1,962.7 $2,021.5 $2,082.2

Unlevered FCF Margin 9.5% 9.5% 9.5% 10.3% 10.5%

Post-Tax Synergies $16.3 $16.3 $16.3 $0.0 $0.0

Free Cash Flow 192.0 197.3 202.7 208.8 219.2 2,214.0

PV FCF $173.0 $160.1 $148.2 $137.5 $130.1 $1,313.9

FCF Calculation

2014 2015 2016 2017 2018 Terminal Value

Revenue $1,850.0 $1,850.0 $1,850.0 $1,850.0 $1,850.0

Unlevered FCF Margin 9.5% 9.5% 9.5% 10.4% 10.6%

Post-Tax Synergies $16.3 $16.3 $16.3 $0.0 $0.0

Free Cash Flow 192.0 192.0 192.0 192.0 195.7 1,779.1

PV FCF $173.0 $155.8 $140.4 $126.5 $116.1 $1,055.8

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No Growth Valuation

‘($ in millions, except per share data)

Share Price Calculation

PV of FCF $1,767.6

+ Cash 170.0

-Debt (504.0)

+ Real Estate 410.0

- Pension Lia (80.0)

- Environ Lia (60.0)

Equity Value $1,703.6

Diluted Shares Out. 83.3

Share Price $20.45

Assumptions

Prepetual FCF Growth Rate 0.0%

2014-18 Revenue Growth Rate 0.0%

WACC 11.0%